1.3 Following a Peak in 2023, a Downward Trend in Comments Emerges

As the charts above illustrate, while there was a notable increase in the number of reviews with comment letters and the number of comment letters issued on Forms 10-K and 10-Q from the beginning of review year 2021 through the end of review year 2023, the trend started to reverse in review year 2024, with a decrease in (1) review year 2024 (8 percent year-over-year decrease in both the number of reviews with comment letters and the number of comment letters issued) and (2) review year 2025 (11 percent year-over-year decrease in the number of reviews with comment letters, 10 percent year-over-year decrease in the number of comment letters issued). This overall trend is most likely attributable to capital markets activity. Throughout calendar years 2020 and 2021, the volume of traditional IPOs and special-purpose acquisition company (SPAC) transactions reached record levels, with more than 800 companies going public during this time frame. During that period, the SEC staff most likely focused on registration statements for IPOs and SPAC transactions and reduced discretionary reviews of annual reports. In 2022, the capital markets slowed, but the earlier activity led to an increase in the number of Forms 10-K filed by public companies, which are subject to recurring SEC staff review. With more public companies subject to review and lower levels of capital markets activity, we saw elevated levels of comment letters in review years 2023 and 2024, although the number of comment letters declined in review year 2024 from its peak in review year 2023. In review year 2025, we observed a more significant year-over-year decrease that is most likely attributable to increased capital markets activity as well as to ongoing changes in staffing levels at the SEC (similar to changes in staffing levels at other federal agencies). We believe that this reversal may continue into next year and that we may see further changes as the new director of the Division establishes the Division’s priorities for the disclosure review program.

Although the number of reviews with comment letters remains elevated, the vast majority of reviews conducted by the SEC staff do not result in a comment letter. For example, in the SEC’s fiscal year ended September 30, 2024, the SEC staff reviewed approximately 3,400 companies as part of the annual review process. However, only about a quarter of the reviews of those companies resulted in a comment letter.